While merger and acquisition activity is heating up in the resources sector, besides a few usual suspects, local analysts remain hard pressed to identify local takeover targets that would offer a major company significant value.
Patersons Securities head of research Rob Brierley said Xstrata’s recent takeover bid for WMC had affected the entire mid cap resources sector as investors speculated on further consolidation in the sector.
Despite this, he said strategic assets that would attract a takeover bid were tough to identify in WA.
“Generally they need to be long life and low cost to attract the majors . . . a few iron ore assets spring to mind plus Telfer,” Mr Brierley said.
In a research note Patersons said Laotian gold and copper miner Oxiana, large Australian gold miner Newcrest, mid cap iron ore miner Portman Mining and Zinifex – the reincarnated Pasminco – rated highly as potential takeover targets.
Mineral sands miner Iluka, which is speculatively seen as a WMC takeover target, is a medium potential target, as is local nickel miner Jubilee. Alumina Australia was also said to be a medium potential target for Alcoa.
Consolidated Minerals, Lihir Gold and MRE it rated as low potential takeover targets.
Hartleys senior resource analyst Kevin Tomlinson agreed that locally there were few world class assets on offer despite the increased appetite.
Mr Tomlinson said Newcrest was a significant takeover target, given its control of the large Telfer gold mine and stake in the Boddington gold mine.
“It could be in play but it depends on how the gold price moves,” he said.
“Any of the big boys like Barrick, Harmony, Goldfields or Newmont would be interested.”
While there were few large assets around Mr Tomlinson said the local junior sector could do with some consolidation to reduce costs.
Peter Strachan, an independent analyst and author of investment newsletter Stock Analysis, said the junior sector could look forward to a lot of corporate wheeling and dealing.
“When you look around there are not too many big companies,” Mr Strachan said.
“You have a crop of younger companies coming through now. Companies like Oxiana, Kagara Zinc and Consolidated Broken Hill,” he said.
He also pointed to WA’s junior nickel sector where a number of companies were potential targets.
